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1 out of 3 Europeans have lost confidence in financial advisors since the 2008 crisis

According to the results of a Fidelity Investments poll on the confidence of investors, the country which is the most critical of financial advisors, singling itself out by its strong resistance to paying for advice, is France....

Article also available in : English EN | français FR

The annual suvey carried out by Fidelity on the confidence of European and French investors, was conducted with almost 1200 Europeans in 14 countries [1]

The bank remains the preferred partner for European investors.

In 2011, the banks were the leading partners of European savers for the purchase of financial products and services. In a context in which priority is given to the "known", the "simple" and the "reassuring", the importance of this applies as much to the products and financial investments as it does for the partners themselves. Among the attributes of stability and loyalty, a long term relationship is the primary reason quoted (by the 37% of those who say they have reasons for their loyalty), followed closely by the quality of advice (35%). Whilst the poll reveals that the 68% of Europeans who subscribed to financial products during the last 12 months, did so via a bank, in France that percentage is clearly more since the investors are 78% more likely to prefer using a bank as their intermediary. Compared with 2010, the European average is down by 6 points (68% against 78%) whilst the French remain at the same level (78%)

It is interesting to note that in 7 out of 14 countries, it is the independent advisor which is the second most popular intermediary after the banks, with insurance companies following. As for the more autonomous investors, they make up 15% who prefer to use internet brokers.

...but this relationship of trust does have some failings

Despite the crisis, the above- mentioned poll of 2010 reveals a continued global confidence : 78% of Europeans declared that they had confidence in their financial advisor. Yet, the confidence that European savers have in their financial intermediaries in 2011 has been rocked globally, with nearly a third (31%) saying that they had less confidence in their financial intermediary since the 2008 crisis - 33% from France. Apart from Poland, all the countries, showed a decline in confidence ( on average 11 points difference with those who said they had more confidence)

More than the quality of advice, which the savers realise is difficult to give in such times, the aspects about which savers are the most critical, are the lack of responsiveness (first criteria at 25%) and secondly, the lack of communication between them and their banking intermediaries. (second criteria at 22%).

In general, the distributor seems less influential in purchasing decisions. 45% of Europeans however think that their bank or insurer does influence their choices ; this figure rises to 53% in France. Lagging far behind are the independent financial advisors (16%), suppliers’ internet sites (12%) and finally family and friends (8%).

A reassuring finding, however, is that 47% of Europeans and 48% of the French, state that they have good reasons to remain with their financial intermediaries and no reason to change. And even out of the 43% which, on the other hand, may have reasons to change, only 10% (and 14% in France) of them have more reasons to leave their intermediary than not to. It is therefore, mainly the increased fees (41% in Europe and 37% in France) and the level of advice (30%) which stand out as the main reasons.

According to Christophe Gloser, the head of Fidelity in France, "If the results are not surprising in the context of the crisis, they do show some weakening in the fundamental relationship of trust with European savers. A detailed understanding of the expectations which savers have, must form the basis of any new relational contract set up with the savers. The Fidelity poll on investor confidence allows us to weigh up these expectations of their financial partners, the degree to which promises and discussions on transparency are translated into concrete acts, as well as interaction with the clients. According to this poll, it seems to me that European savers are expecting a more frank and mature relationship and this also applies to, not only the developers of financial products and financial solutions, such as Fidelity, but also to the distributors, such as the banks, and Asset management advisors."

Personalised explanations and transparency on the costs involved are the core of restoring confidence.

Financial intermediaries are at the forefront of the expectations of the savers who demand clear information, good quality advice and transparency of costs involved at each stage of their mutual relationship. They also want their intermediaries to listen to any of their questions.

The quality of the information obtained is perceived as excellent or good for 64% of Europeans and 66% of the French. A quarter (26% of Europeans and 22% of the French) however, consider the information as mediocre, even poor, to a certain degree. As far as the understanding of investments goes, the main aspects quoted by the Europeans concern investment horizons (30%), the concept of liquidity of the product (27%) and finally, the level of risk (26%). As for the French they specifically mention, as a priority, the possibility of recovering their costs without penalties (26%), followed by tax advantages (22%), and finally, equality between the level of risk and expected performances (20%). Those who say they do not understand, highlight the difficulty in comparing information (26%) and the use of technical vocabulary (18%).

As far as advice goes, 7 out of 10 savers say they are generally satisfied with the quality of advice and 10% are completely satisfied. In France, the situation is slightly less, with 6 savers out of 10 generally satisfied and 7%, fully satisfied..A more alarming fact is that there is 1 out of 5 Europeans who feels that his advisor puts his own interests ahead of his client’s. The costs are the highest in Italy and France with 32% and 31% respectively questioning the integrity of their advisors.

In the context of weak performance and high volatility, the costs often determine the discussions. Costs are at the heart of the savers’ demand for transparency. Although, for 37% of respondents, transparency of costs is a pivotal criteria, the majority (72%) want to know more about costs.

However a significant number of investors (56%) still don’t want to hear about invoicing consultancy fees - a little practiced custom. The percentage of respondents who say this in France reaches 76%. The main reason for this, according to the 59% of European savers and 71% of French savers, is that they feel that their advisor already receives a salary from the society employing him. The 44% who do not mind the fees, do so on condition that the advice is personalised and transparency of costs exists.

Christophe Gloser, Head of Fidelity in France, indicates: "this survey shows that, despite some weaknesses, Europeans still have confidence in their financial partners. As for the manifestation of this confidence - there is no confidence - the cursor moves in the opposite direction. Certainly, some of the aspects taken in context explain this situation - in particular, the 2008 crisis which still lives on in people’s minds, as well as the present crisis which is also casting a shadow over the outlook for European investors and their wealth.

It is imperative to restore confidence It is the only way to allow investors to get back on track with investing in order to, on one side prepare for their future and meet the challenges of retirement and dependence and on the other hand to encourage long-term saving which the economy needs for growth. Here at Fidelity, we work daily side by side with the distributors of financial products to assist them in their efforts to better understand the needs of individuals , the way the financial markets function and to find appropriate financial solutions. We believe now, more than ever before, in the return to fundamentals and basic rules of investment for savers"

Next Finance , October 2011

Article also available in : English EN | français FR

Footnotes

[1] About the survey – Methodology

Population sample : 12057 interview in 14 countries of which:
- 10 countries each each had 1000 interviews (Germany, Austria, Belgium, Spain, Italy, Holland, Poland, United Kingdom, Switzerland)
- 4 countries each had 500 (Denmark, Finland, Norway Sweden)

Target : Population representative of active people over the age of 18, having or having had saving products

Quotas on the sex, age, profession and the country.

Time Period of poll From 12 July to 1 August 2011

Method of data collection Online

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